Can blockchain help King County's urban carbon credits go further?
In June, King County made headlines for a huge deal in the fight against climate change: three parcels of land – in King County, Issaquah and Shoreline – got the highest prices ever for carbon credits generated by urban forests.
The purchaser is Regen Network Development, a Delaware-based blockchain company that plans to offer the credits for resale in the coming days. Regen is among several technology companies working to connect carbon credits to digital tokens via blockchain, a system advocates say makes carbon credits more transparent and accountable.
To understand how these local trees may benefit in new ways from carbon credits backed by blockchain technology, KNKX paid a visit to one of the urban forest sites.
Carbon certification funds conservation work
Ballinger Open Space stands at the end of a dead end street in a residential neighborhood north of Seattle. A creek at the center of the parcel has prevented its development. The sound of birdsong here easily overpowers the dull pulse of traffic from I-5, the busy freeway nearby.
The Mountains to Sound Greenway Trust recently cleared out two and a half acres of invasive weeds here and planted nearly 2,000 trees. Restoration projects manager Dan Hintz grinned ear-to-ear as he looked up at fast-growing black cottonwood, admiring how it soaks up carbon pollution.
“You can kind of see some of those really, really big leaves at the top of the tree there are just soaking up sunlight,” he said, “going through the photosynthesis process and, through that, taking a lot of carbon dioxide out of the air.”
He noted that this project is similar to many the group has done over the years. But this one is certified by a carbon registry, for the service the new trees are providing: removing carbon from the atmosphere over the next 25 years.
“A lot of the project funding you get for sites like this, you know, is maybe only for three or four years. But to have these credits, coming in every handful of years throughout that 25-year process will generate revenue for us to continue to maintain and take care of the site,” Hintz said.
It's a virtuous cycle. If the trees grow well, the value of the credits will grow. And their sales fund the conservation work over the life of the carbon contract.
While the Ballinger Open Space generates its carbon credits through planting new trees, the two other sites included in Regen's urban forest credit purchase generate carbon credits through preservation – protecting existing forests from development.
More value for urban carbon credits
City Forest Credits, a Seattle-based nonprofit carbon registry, calculated how much carbon is being absorbed at the Ballinger Open Space. While bigger registries tend to capitalize on large rural projects, City Forest Credits focuses exclusively on smaller urban forestry projects.
“Unlike almost every other kind of carbon credit, these are credits that have a community impact,” said Mark McPherson, the organization’s founder and executive director.
“These are right where people live and breathe, recreate, work. And there's a place for a smaller volume, really valuable -- and hopefully higher priced credit,” he said.
The recent deal for Ballinger Open Space and two other projects in King County validated that idea. It fetched some of the highest prices ever for carbon capture.
Regen paid more than $1 million to buy up all of the City Forest Credits available nationwide, from 13 projects – a price nearly double the going rate for rural forest carbon credits. The credits will be digitized as tokens for sale in Regen's new marketplace.
King County’s forest carbon program manager Kathleen Farley Wolf said they normally sell their credits to local buyers, to keep all the benefits in the community. But this deal offered other benefits, including a whole new direction for the work.
“So we definitely – there's a tradeoff for us in the sale,” Farley Wolf said. “But we decided for a very small number of credits to go ahead with it.”
Still, Farley Wolf said she had to learn a lot to get comfortable, including more about blockchain technologies.
Blockchain technology is a decentralized network of computers, that uses duplication to create an immutable record. Imagine a game of "telephone" where the last person actually receives the original message.
Based across the country, in Delaware, Regen runs on a blockchain – the same technology that powers Bitcoin and other crypto-currencies. Many of those cause all kinds of carbon pollution, because they rely on huge amounts of computer power and servers running around the clock.
But Farley Wolf said she learned there are different kinds of blockchains. And the kind Regen uses aren’t energy hogs.
“They provided us with their carbon footprint. It's extremely low. It's 565 tons of carbon dioxide per year. They gave us the comparison to Bitcoin, which was 23 million metric tons per year,” Farley Wolf said.
The low carbon footprint and the high-profile group sale at premium prices ultimately assuaged any concerns, she said.
The role of blockchain in carbon credit markets
Since blockchains use decentralized computer networks to provide permanent records that can’t be altered, they manufacture trust, said Sreeram Kannan, a professor of computer engineering who runs a blockchain research lab at the University of Washington.
He said this technology could be a powerful tool for carbon credit markets and other ways of fighting climate change. "Because we do need global cooperation for solving something like the climate problem,” Kannan said.
“And blockchains provide mechanisms by which untrusting parties can come together and still have global common information…And cooperate in a way that is programmatic. And so I think blockchain is a good fit to climate change at a high level.”
But what about on the local level?
Kristian Kicinski, director of sustainability for Bassetti Architects in Seattle, said they’ve bought City Forest Credits straight from King County for two years running now.
“This was something tangible. We could say we helped to protect these areas of forest, in King County. And so that really made a lot of sense.”
He said buying City Forest Credits locally was a no-brainer. Now they’re sold out for 2021 and he hasn’t yet bought the next round for his firm. He’s not sure what he’ll do.
Diving into the larger carbon credit marketplace isn't a straightforward option either.
One reason companies like Regen are marrying carbon credits and blockchain is because researchers have found carbon credits that exaggerated how much carbon is absorbed, were fraudulent or were being sold multiple times. But not everyone is convinced that blockchain is the solution.
Still, that's part of Regen's vision. Founded in 2017, the company participated in the Techstars Sustainability Accelerator and has its roots in regenerative agriculture.
Sarah Baxendell, Regen director of ecosystem, recognizes the appeal of local buyers buying local credits. She encourages them to still do so through Regen but said anyone interested in those City Forest Credits better be ready to act fast.
“A lot of the projects only have a couple of hundred credits apiece, so they really won't last very long, particularly if the local communities are aware of when the credits are coming live in the marketplace,” Baxendell said.
She said Regen bought them to increase their offerings as they launch their marketplace in mid-to-late September, because originating credits using their new tools can take many years and City Forest Credits was a good fit. Baxendell said they’re not looking to undermine local buyers.
Back in King County, a small Douglas fir continues its journey upward, towards the sun.